Health spending projected to grow modestly, but faster

U.S. health spending is expected to grow faster over the next decade than in recent years, reflecting a stronger economy, an aging population and higher levels of insurance coverage through the Affordable Care Act, a new federal report says.

The projections follow "six years of national spending growth hovering near historically low rates," says Sean Keehan, an economist at the Centers for Medicare and Medicaid Services who led the study, which was published in the online version of the journal Health Affairs on Tuesday.

Still, Keehan adds, "these projected growth rates are significantly lower than those observed over the three decades prior to the recent recession."

The study projects U.S. health spending growth will average 5.8% for 2014-24, far less than the average of about 9% over those pre-recession decades. Growth averaged a low 4% a year from 2008-13.

Overall, health spending is expected to rise to $5.4 trillion by 2024, surpassing growth in the Gross Domestic Product, which is expected to average 4.7%. That means health spending will account for about a fifth of the U.S. economy in 2024 — 19.6% to be exact, up from 17.4% in 2013.

Chapin White, a senior policy research with the RAND Corporation, a nonprofit, non-partisan research organization, says that's not necessarily going to happen -- and, in fact, none of the projections are assured. "There's a lot of uncertainty around these projections," he says, adding that what ultimately happens depends a lot on decisions and policies yet to be made.

The study also notes:

In 2014, according to projections, national health spending grew 5.5% to $3.1 trillion, or $9,695 a person. About 8.4 million Americans gained health coverage last year, the study says, and there was a big increase in prescription drug spending growth, fueled in part by expensive specialty medications for hepatitis C, cancer and multiple sclerosis.

National health spending is expected to slow slightly to 5.3% in 2015 as the effects of the ACA's Medicaid expansion moderate following the initial surge, and as lower costs for specialty drugs are negotiated. Also in 2015, growth rates in private health insurance premiums and benefits are projected to accelerate slightly as more people enroll in plans through Obamacare insurance exchanges.

By the latter years of the decade, health spending growth rates are projected to rise to an average of 6.2% a year as more Baby Boomers become eligible for Medicare and the Medicaid population ages. About 19.1 million more people are expected to enroll in Medicare over the next 11 years.

These trends don't just affect the overall economy; they also hit consumers' pocketbooks.

For instance, the price of medical care is rising, but more slowly than before. Hospital price growth, for example, decelerated to 1.4% in 2014, the slowest rate since 1998. Growth in the cost of doctors' and clinical services is expected to remain near historically low rates through the early part of the decade, but eventually go back to average rates.

And this year, the growth in per-person premiums for private health plans is projected to slow to 2.8%, reflecting, in part, the recent surge in high-deductible health plans offered by employers.

Study authors say the trend toward more high-deductible health plans is also expected to tamp down growth in spending on medical services. When people have to pay more out-of-pocket for their own care, experts say they tend to choose less — and less expensive — care when possible.

But overall, officials stress that one of the main themes over the next decade in health spending can be captured in one word — "modest."

"Growth in overall health spending remains modest even as more Americans are covered, many for the first time. Per-capita spending and medical inflation are all at historically very modest levels," says Andy Slavitt, CMS acting administrator. "…The task ahead for all of us is to keep people healthier while spending smarter across all categories of care delivery so that we can sustain these results."